DeFi

How does @THORChain works?

1- It's a cross-chain AMM, LP style. In simple terms, think about a pool with native BTC + native ETH (without being constrained by both assets needing to be on the same chain).

@THORChain, @THORChainUni & @Maya_Protocol Mod 😻

So user can swap between those assets, or deposit both assets as a LP provider. (Actually, all pools in TC are paired with RUNE, but we will get back to this later).

Here is where the magic of MPC TSS comes in. This allows a group of decentralized nodes to manage BTC/ETH addresses, but in a trust-minimized way, without the private keys ever being exposed, even between those nodes themselves.

3- Great! But how do those nodes agree to the accounting of the BTC/ETH LP? Here is where the magic of Cosmos SDK based app-chain comes in. Let's build an independant blockchain to act as the "state machine". Where LP accounting can be tracked via blockchain consensus mechanisms

4- Now, how do we ensure the nodes don't just collude and steal the BTC/ETH away? 

4a- First, let's make sure all the nodes bond/stake something of value (the $RUNE coin), and the bond value must always be higher than the external assets (BTC/ETH) managed by these nodes.

4b- Also, let's make all pools paired with RUNE. Two-fold reasons, 1- reduce fragmentation of pools, and 2- as the value of $RUNE rises and falls, the pools will rebalance so that bonds will always have more value than the pools.

And there you have it. A super simplified intro explainer on how @THORChain works (at least the LP portion).

Wanna learn/chat more? Come to @THORChainUni Discord! 💚⚡️

2- Unlike e.g. Uniswap (where it's just smart contracts on an EVM), how would you manage a LP with native BTC + native ETH? Well, those native BTC have to be in a BTC address on the BTC blockchain; and the native ETH in an Ethereum address on the Ethereum blockchain.